Doctrine:

The doctrine in this case is hereby provided by the Constitution that

No franchise, certificate, or any other form of authorization for the

operation of a public utility shall be granted except to citizens of the
Philippines or to corporations or associations organized under the laws of
the Philippines, at least sixty per centum of whose capital is owned by
such citizens.

The term “capital” in Sec. 11, Art. 12 of the 1987 Constitution refers only to
shares entitled to vote in the election of directors, and thus in the present
case only to common shares, and not to the total outstanding capital stock
which are the (common and non-voting preferred shares).

The 60% of the capital assumes, or should result in, “controlling interest”
in the corporation. Compliance with the required Filipino ownership of a
corporation shall be determined on the basis of outstanding capital stock
whether fully paid or not, but only such stocks which are generally entitled
to voted are considered.

For stocks to be deemed owned and held by Philippine citizen or

nationals, mere legal titled is not enough to meet the required Filipino
equity. Full beneficial ownership of the stocks, coupled with appropriate
voting rights is essential. Thus stocks, the voting rights of which have
been assigned or transferred to aliens cannot be considered held by
Philippine citizens or Philippine nationals.

Individual or juridical entities not meeting the aforementioned

qualifications are considered as non- Philippine nationals.

The constitutional requirement of at least 60 percent Filipino ownership

applies not only to voting control of the corporation but also to the
beneficial ownership of the corporation. It is therefore imperative that such
requirement apply uniformly and across the board to all classes of shares,
regardless of nomenclature and category, comprising the capital of a
corporation.
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